Retail sales in the eurozone dropped by 1.2% in March compared to the previous month, according to the European Statistical Office (Eurostat). This was significantly higher than the 0.1% drop that economists had predicted. On a year-on-year basis, retail sales were down by 3.8% in March.
The decline in retail sales was attributed to a decrease in household purchasing power, which has been impacted by rising inflation and interest rates. Additionally, households have been saving more money, both due to the high interest rates and as a precaution against a potential economic downturn.
The fall in retail sales suggests that consumer spending, a key driver of economic growth, may weaken in the coming months. It is also a concern for the European Central Bank (ECB), which has been working to stimulate inflation and economic activity in the region.
The ECB has been keeping interest rates at historic lows in an effort to encourage borrowing and spending. However, the recent rise in inflation has led to speculation that the central bank may need to adjust its policy stance. The ECB is set to meet next month to discuss its monetary policy, and analysts will be closely watching for any indications of a change in direction.